As we move into a new calendar year, it’s normal procedure to reflect on the previous twelve months and anticipate how industries and technologies will evolve in the coming year.
But the year 2020 was unlike any other. And normal procedures no longer apply.
You only need to look at Google search volumes of “unprecedented” to see this in action. People, businesses, and entire countries have been faced with so many unknowns – perhaps why so many people are glad to say goodbye to 2020, bidding farewell to the “unprecedented” and hoping for a more stable – and predictable – 2021.
But what does that future look like for insurance? Is stability ever really possible in an industry grounded in risk? And how will our work and personal lives be impacted by the “stay at home” orders so many of us have experienced this year?
We’ve asked industry experts for their views on what’s to come in 2021 and beyond. In the first post in this series, we hear from:
“2021 should be a hugely promising year for the UK insurtech sector. 2020 brought the biggest challenge facing businesses and the economy in a generation, but insurtech proved its resilience. It has emerged from the pandemic in a good position to support the wider economic recovery and help drive technology innovation.
“There are several things which could work in the sector’s favour next year. The FCA’s general pricing measures could disrupt the power that aggregators have over the insurance market and might lead to consumers looking for alternative insurance solutions. Additionally, we are hoping to see more insurtech businesses scale, perhaps even seeing the first UK insurtech unicorn! Greater governmental awareness and support for the sector will really help maintain this momentum.
“However, the year will no doubt come with potential challenges. The impact of COVID-19 on long-term investment into the sector is unclear, and it remains to be seen whether the pandemic becomes the true catalyst for more wide scale digital transformation within insurance – we must prevent indecision hampering the progress.
“Overall, I am positive for what 2021 brings; there will be bumps in the road but the sector must capitalise on the opportunity to drive more wide scale change within our sector.”
“In 2021, we will increasingly knit the invisible threads of our patchwork of future legacy. Over the last few years carriers have emboldened their growing innovation, data and analytics teams. As executives, busy with embracing the hard market, pay less attention to those teams, they’ll just get on with supporting the business’ smaller, cheaper, below-the-radar requests, rather than pushing for strategic solutions that come with big price tags and are not appealing to class-specific business sponsors.
“Thus, lots of individual areas of the business will be happy, but the seeds will be sown for divergent external data sets, with no clear-hierarchy around the data, and individually delighted owners who don’t want to give up their point solutions. In the short term everyone’s happy; in half-a-decade’s time there’ll be stress and recriminations, as people then need to pull it all together once businesses finally take the steps towards more coherent data usage.
“Buoyed by Covid-driven savings on motor frequency, thefts, and trips and slips – how long will it be before insurers drive prices down in an effort to get some “organic growth” and start the inevitable soft market? I expect some insurers to invest in the data and technology solutions that will help them prioritise quotes and improve risk selection in this soft market. This will lead to sustainable, long term organic growth without sacrificing profitability. That might be the only way traditional insurers can hold back the tide of new, cheaper capital available to attack any inefficiencies in the market. Those new players are set to make real inroads in 2021 and beyond.”
“Just about everywhere you look nowadays, someone in our industry is talking about high expense ratios. During the soft market, underwriting management focused on reducing the cost of travel and entertainment as margins were thin. With the market now harder, the pressure is on acquisition costs, travel and entertainment expenses have substantially reduced due to Covid-19 anyway.
“However, to make long-lasting savings, fundamental change is required. Electronic trading has the potential to reduce expenses, but only when data can be moved directly from distribution partners into underwriting systems. This will remove the re-keying of data, reduce error rates and will lead to smaller processing teams. This will have a marked effect on all expenses, particularly acquisition costs, as brokers will have lower processing costs. This will enable brokers to reduce commissions, without impacting their earnings, which in turn will enable underwriters to provide a more competitive product.”
“2020 was a chaotic year. As a result, I believe we’re going to see some creative insurance solutions in the future, and I foresee 2021 being the year of the customer. We will see an abundance of new direct to customer, tech-first MGAs popping up – focusing on niches where the claims process will be the heart of their proposition.
“Following the uncertainty of 2020, trust has come to mean everything to the customer; more so than before. The difference I see in 2021 is that customer experience will be necessary to succeed. A good piece of technology won’t be enough, the focus will be on empathy felt and built towards the end insured.”
Do you agree or disagree with these expert views? We’d love to hear your thoughts with a comment on Linkedin here, or feel free to get in touch with us directly if you prefer.
Look out for our next post in the 2021 predictions series, coming to Cytora’s blogcast soon!
